The Boeing Company Hits Turbulence Again With Its 787

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The Boeing Company (NYSE:BA) has run into trouble with its newest family of planes, the 787 Dreamliner, yet again. The company managed to recover from last Friday's share price drop of 4.6% in less than a week just in time to face another incident yesterday.

A Japan Airlines (TYO:9201) plane en route to Tokyo had to return to its departure airport in Boston after a mechanical indicator alert came on, following "a standard precautionary measure," as an airline spokeswoman told Reuters. A US aviation official said that the incident – an issue with the plane's fuel pump – wasn't an emergency.

Even though this incident is not connected to the troubled Li-Ion batteries that led to a prolonged 787 fleet grounding earlier this year, this latest event sent Boeing stock down 1.8% shortly after markets opened today.

Investors are cautious when it comes to Boeing stock, in light of the ongoing probe about the fire aboard a parked and unoccupied Ethiopian Airlines' 787 Dreamliner in London Heathrow Airport on July 12.

The fire severely damaged the fuselage of the plane, but no one was hurt. Yesterday investigators from Britain's Air Accident Investigations Branch (AAIB) said in a bulletin that an emergency beacon produced by Honeywell (NYSE:HON) might have caused the incident. AAIB also noted that 6,000 beacons of the same design were installed in a wide range of aircraft without any issues.

The beacon, officially called an Emergency Locator Transmitter (ELT), is used to alert and guide rescue crews to the plane's location in case of an accident. The ELT model Rescu 406 AFN uses an independent Lithium-Manganese battery, and it might have been the source of the trouble, AAIB reported. While not a required part for US-based planes, a number of international airlines install the beacon to comply with local regulations around the world.

Honeywell Rescu 406 AFN. Photo courtesy of Honeywell.

Boeing supported the recommendations British investigators outlined in their report – to turn off ELTs in 787 planes and to review the safety of the beacons in other aircraft types. "We are confident the 787 is safe and we stand behind its overall integrity," said Boeing in its statement.

The company's woes come not only from issues with 787s, but from the competition, too.

Boeing shares faced the most significant slip this year in mid-June, after Airbus (EPA:EAD) successfully completed test flights of the first A350 aircraft, the new wide-body jet family set to compete with 787s and 777s.

Airbus appears to be on schedule with its flight test campaign, passing the mark of 92 hours in the air, total, for its first A350 development aircraft. The first commercial A350 is set to arrive in late 2014.

Airbus has raised its order target from 800 to more than 1,000 aircraft this year, challenging Boeing's lead in the $100 billion jet market. The longtime Boeing rival has also celebrated the delivery of its 1000th A330 wide-body jet to Cathay Pacific this Friday and has announced ongoing work on a smaller, regional version of the A330.

But Boeing has some better news in store, too.

While it was undoubtedly a tragic event, the July 6 Asiana Boeing 777 crash in San Francisco demonstrated that the robust design of the 777 may have helped prevent a higher death toll, experts noted. The accident that took three lives out of 307 people aboard was likely caused by a pilot mistake, so Boeing shares went up after the markets reopened on July 8.

The first new longer 787-9 aircraft left the factory in Everett, Washington, this Wednesday. The new Dreamliner version will be delivered to customers in early 2014. Further expansion is underway, with even bigger 787-10 versions arriving in 2018.

Boeing has a solid lead in demand for new generation planes so far, boasting 930 orders of 787 Dreamliner family planes, compared to 678 orders of A350s.